We are now technically out of our reversal zone for the broad stock market (it ended yesterday), and the DOW and S&P 500 are pushing up to new all-time highs. The NASDAQ, however, has not made a new high this week and is edging down. This, of course, is a strong intermarket bearish divergence signal. Nevertheless, I am reluctant to sell short right now. The new highs in the DOW and S&P 500 are being made outside of our reversal zone (although a top only a day or two out of the "zone" is possible). The DOW looks especially bullish at the moment and could easily be in "break-out" mode and surging into the next strong reversal zone coming up next week (Aug. 17 - 25). Both the DOW and S&P 500 are early in their medium-term cycles, which is another bullish sign. The NASDAQ could also be a new cycle and bullish, but if it's an older cycle, it could fall steeply now to its final bottom. There is a possibility here of the NASDAQ taking its deep final older cycle correction with the DOW and S&P 500 taking only sub-cycle corrections, but if the NASDAQ is a new cycle, it too would only take a moderate sub-cycle correction. I am going to stay on the sidelines for now with the idea that the DOW and S&P 500 could keep this market bullish, at least into next week's reversal zone, and possibly also into September. If the S&P 500 does correct down and breaks clearly below 4,233, we will have to change our bullish view and consider the possibility that a MAJOR long-term correction has started in the broad stock market.
Gold and silver seem to be recovering a bit from Monday's dramatic plunge, but they don't look especially bullish at the moment. Monday's low was in the center of our reversal zone for the precious metals (which ends today), but there's another one coming up next week (Aug. 17 - 26). One or both of these metals could make another low (or double-bottom) in that new reversal zone.
If gold is a young medium-term cycle that started on June 29 (at $1752), then the cycle has turned VERY bearish and prices will be down for at least nine more weeks. But if gold is moving down to the final bottom of an older cycle, we could see that bottom this week or next (it could have even happened Monday). If the older cycle is valid, we want to see prices stay above $1750, and especially above $1700. Any break below $1677 means that the younger cycle is in place and the market has turned very bearish. This is a strong possibility now.
Silver is definitely an older medium-term cycle that is now correcting down to its final bottom. That bottom could have been with Monday's low at $23.02, but prices could still go lower into next week's reversal zone and bottom then. This bottom could be a good buy spot (the start of a new cycle is always bullish), but if gold turns bearish (as described above), then any bullish rally might be dampened by gold's bearish trend.
We will remain on the sidelines of both gold and silver for now.